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Crypto: The Invisible Currency

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Crypto: The Invisible Currency

Peyton Long, Reporter

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Bitcoin, the cryptocurrency, has been a popular topic in the news for the past few years. Many people have invested in bitcoin and made millions, just as many have lost it all, but what exactly is cryptocurrency?

Cryptocurrency is just another form of money, like the US dollar or British pound, the only difference is the way it is represented. When a dollar is made, it exists in a physical form, called a bill, that represents how much it is worth. This bill can do many things, from investing in a bank to buying groceries, but no matter what happens, the bill exists somewhere.

Cryptocurrency is similar except, instead of a bill, it is an encrypted source code. This piece of code can be used in all the same ways a bill can be used: except, it is invisible. If there is nothing physical telling how much it is worth, how is it possible to use or even tell how much there is?

Put simply, it is the work of computers. Instead of a person looking at a physical bill and being able to tell its worth, computers un-encrypt the code which tells them how much cryptocurrency there is. From there, the computer can tell the worth of it in other currencies like dollars. It is similar to money but all computer based.

If cryptocurrency is like dollars then how does the price shift? Should it not just have a set amount like other currencies? No, most cryptocurrencies do not have a fixed worth like real money instead, their worth is based on investments and trade. Their worth almost works the same as stocks. The more people that invest in a cryptocurrency, the higher the prices. If people stop buying and start selling more, the price will drop.

Unlike stocks though, the price of cryptocurrency is only a perceived value meaning they do not have something backing it up like a company. This is the reason why prices of cryptocurrencies can fluctuate rapidly in a short amount of time and bubbles, time where a currencies value increases rapidly before dropping, are common.

Should my money be invested in cryptocurrency? Most experts in investing say no, at least not in large amounts. The success of a cryptocurrency is hard to tell, unlike stocks which have general market prediction, cryptocurrency success is luck based. Most people who get rich off a cryptocurrency invest before a price increase and sell during a bubble. People who invest during a bubble may see temporary profits but just like a real bubble it will eventually pop drastically dropping worth, leaving people who put all their money in crypto in financial ruin.

 

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Crypto: The Invisible Currency